That question has been asked of me several times since the post below, and the news came out that the Fed may have a new target rate of 4.5%.
This morning on CNBC, the Federal Housing Finance Agency director, James Lockhart was interviewed, and seemed to both confirmand deny the target rate. He said that they have no ‘target’ interest rate, and was happy that rates were now at 5.5%.
At the same time, he acknowledged what I have written about here, that the traditional spread between Treasuries and Mortgage Backed Securities (MBS) has just not been there. Normally the spread is about 1-1.5% higher than Treasuries. Obviously, with the 10 year note at 2.73%, that would put 30 year fixed rates between 3.75-4.25%.
Well, 5.5% is not bad, and there is no magic bullet to get us lower, although with Freddie Mac, the Treasury Dept, and now the Fed all buying Mortgage Backed Securities (MBS), there is a shot that mortgage rates will dip. That is conforming mortgage rates and FHA mortgage rates should see some downward pressure over the next few days and weeks.
My advice: If you are thinking of refinancing, get the docs in and be ready, and on a downturn, lock your rate. And if you are thinking of buying? Wow, now is one of the best times to buy in years. Rates are low, home prices around Atlanta are lower than they have been in about a decade, and the sentiment generally on housing is still negative – which is a big plus if you are negotiating on a purchase price and seller concessions.
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